Friday, May 27, 2016

The world is moving towards renewable energy and we are looking at nuclear energy

For many decades, fossil fuels were the main source of electricity generation. Although for decades renewable energy had been identified as a source of renewable energy, its usage to generate electricity was limited and it was viewed as costly and cannot compete with fossil fuels. However, sources of renewable energy continued to fight for a share of the market, even if only a limited share, with much support of environmentalists. Indeed, in recent decades, renewable energy carved a place for itself on the world energy map, then the 2008 global financial crisis happened and increased pressure on the renewable energy sector which was predicted to regress dramatically, but that did not happen.

In the past few years, renewable energy sources have scored prominent successes which in past decades were viewed as science fiction. Wind energy generated 40 per cent of Denmark’s electricity last year, and sometimes peaked to 140 per cent of the grid’s needs which made it possible to export excess electricity to neighboring countries. In other countries, renewable energy accounted for 100 per cent of usage at times, such as Iceland by relying on geothermal energy and Norway using hydroelectric energy. Germany, the largest producer of renewable energy in Europe, was able to rely on renewable energy sources to meet 30 per cent of its electricity needs last year. One day this month, renewable energy provided all of Germany’s electricity needs.

Meanwhile, renewable energy in Portugal met all demand on electricity for four consecutive days last year, thanks to a blend of wind, solar and hydroelectric energy. This month, Britain celebrated an entire week of generating electricity without relying on coal thanks to a variety of renewable energy sources. Relying on renewable energy is not exclusive to Europe or developed countries. In Costa Rica in South America, the electricity grid relied solely on renewable energy sources – especially hydroelectric – for an entire 75 days last year. These great achievements make relying on renewable energy an indispensable move for countries that want to expand their capability of generating electricity in a sustainable and environment-friendly fashion.

Although countries that were able to largely rely on renewable energy have smaller populations and extensive territories or natural resources that generate renewable energy, other countries in Europe with larger populations are also seeking to increase reliance on renewable energy for power generation. This confirms there is a general global trend to encourage renewable energy based on two main reasons. First, government support in Europe and countries interested in creating multiple sources of energy without relying on fossil fuels in order to establish sustainable power generation that reduces the impact of fluctuating oil prices on the economy, and cutting down the environmental harm of fossil fuels and nuclear power plants. The government of German Chancellor Angela Merkel is planning to decommission coal and nuclear plants in the coming years. All signs indicate this ambitious goal is on its way to becoming a reality.

Government support is not just in the form of slogans but must be translated into economic incentives that encourage renewable energy sources and make them financially profitable, which would encourage investors to pour their money into this sector.

Second, the decrease of cost of building and operating renewable energy power plants as the number of such plants increases and the energy they generate grows, as well technological advances. This reduces the cost of the electricity generated and makes renewable energy more attractive.

Egypt suffered repeated electrical blackouts between 2011-2014 which agitated the public, but a quick and extensive plan to raise power output increased supply and outages dropped. The fast action plan included a major deal that could be viewed as historic, with a giant German company to increase the capacity of the power grid by nearly 50 per cent through power plants that primarily run on natural gas, as well as several plants using wind energy at a cost of $10 billion. The government also made a priority of supplying natural gas to power plants instead of factories, which negatively impacted some industries but explains the remarkable improvement in the performance of the electricity grid.

Although the government launched an ambitious plan to bolster the use of solar energy with the promise to buy the generated power at rewarding prices from investors, this programme has not yet started to generate electricity, and its overall capacity is limited. What is new is the nuclear plant in a deal with the Russians at a cost of $25 billion, which will mostly be funded by borrowing from Russia.

One cannot deny the recent vast improvement in electricity supply compared to repeated outages in past years, but the overall outlook raises many key questions. What is the point of greatly increasing the output of the power grid? Will the economy grow at unprecedented rates and thus requires this excess power that is under contract today? On the other hand, at a time when European countries are cutting down their reliance on nuclear energy and fossil fuels, why do not we do the same instead of building a nuclear plant and gas and coal plants? As for the type of contract, the largest deals were for purchases not investments which increases the government’s burden. More importantly, will Egypt be able to pay back its foreign debts which are rising dramatically? Even if the average foreign debt is still small today, the latest increase in foreign debt as hard currency resources recede, makes some of these deals an economic risk. While we acknowledge improvements in electricity supply, we should look at the details to avoid negative repercussions in the future.

Omar El-Shenety
27 May 2016 
This article was published in "Al Ahram Online"

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